When the order value is modest, pursuing a claim across borders may cost more than the amount in dispute. A sound contract helps, but prevention is usually more practical than relying on a later lawsuit. The following checks can help buyers make a better-informed decision before signing.
Check the supplier’s exact registered Chinese name and Unified Social Credit Code in China’s National Enterprise Credit Information Publicity System. Confirm its registration status, legal representative, registered address, and any publicly listed operating abnormalities or serious violations. The system is linked through the website of China’s State Administration for Market Regulation.
Make sure the company named in the contract is the same company you have been negotiating with and the same company that will receive payment. A brand name, website, business card, or messaging-app account is not enough to identify the legal contracting party.
If the supplier is a trading company, ask what role it plays in the transaction. Is it buying and reselling the goods, acting as an agent, or arranging production through a factory? Ask for the manufacturer’s registered name and address, and verify those details independently. Clarify in the contract who is responsible for production, quality, delivery, and defects—including where a factory or subcontractor is involved.
Ask for product catalogues, relevant licences or certificates, export experience, production capacity, and references for comparable orders. Where practical, visit the facility or arrange an independent inspection. A video tour or factory photograph can be useful, but it should not be your only check.
For a new supplier, consider ordering a sample or starting with a smaller trial order. Confirm that the sample’s specifications and quality are recorded in the contract or an attached technical document. For a larger order, consider an independent pre-shipment inspection before releasing the final payment.
A very low quotation may reflect genuine cost advantages, but it can also mean that the specification, materials, quality level, delivery costs, taxes, or after-sales obligations differ from what you expect.
Compare quotations on the same basis. Confirm whether the price includes packaging, transport, insurance, export formalities, applicable taxes, testing, and certificates. Record the product model, materials, dimensions, tolerances, performance requirements, and approved sample in the contract or its attachments. China’s Civil Code identifies matters such as the goods, quantity, quality, price, delivery, packaging, inspection, and settlement method as typical terms of a sale contract.
Avoid paying the full price in advance unless there is a strong, verified commercial reason. Consider linking instalments to clear milestones—for example, a deposit, documented production progress, successful inspection, and delivery of the required shipping documents.
Pay into a bank account held in the contracting company’s name. If the supplier asks you to pay an individual or an unrelated company, pause and verify the reason through a trusted channel before sending funds. Do not rely only on a new bank-account instruction received by email or messaging app; confirm it using contact details you already know.
If the contract uses a deposit, state clearly what the payment is for and what happens if either party fails to perform. Under China’s Civil Code, a legally defined deposit (定金) is generally capped at 20% of the principal contract amount; a payment described as an advance or prepayment may not have the same legal effect.
Specify the delivery date or schedule, delivery location, packaging, shipping method, and which party arranges and pays for transport and insurance. For cross-border shipments, identify the agreed Incoterms rule, version, and named place—for example, “FCA [full address], Incoterms® 2020.” Address separately when ownership transfers, when the risk of loss transfers, and what documents the seller must provide.
Set a workable inspection process. State how long the buyer has to inspect the goods, how defects must be reported, what evidence is required, and what remedies apply. These may include repair, replacement, delivery of missing goods, a price reduction, refund, or cancellation. The Civil Code provides for remedies where goods do not meet the contract, but relying on general statutory rules can leave important practical questions unresolved.
Confirm that the person signing has authority to sign for the company. Obtain a fully signed copy bearing the company’s official company chop or contract chop, and retain the final version with all attachments. The Civil Code recognizes contracts in different forms, but it is safer to preserve clear evidence of the final agreed terms and the parties’ authority.
If the contract is bilingual, state which version prevails if the texts differ. Attach the agreed specifications, drawings, quality standards, sample records, and purchase order, and say which document controls if they conflict. Read standard terms carefully, especially clauses on acceptance, exclusions of liability, unilateral changes, automatic renewal, and cancellation.
A contract should identify its governing law and provide a clear process for resolving disputes. Depending on the transaction, that may include negotiation or mediation before court proceedings or arbitration. If arbitration is chosen, name the institution and specify the seat and rules; a vague reference to “arbitration in China” can create avoidable uncertainty.
For a relatively small order, the cost of a cross-border claim may be disproportionate to the amount at stake. Consider that when deciding how much to pay in advance, whether to use an independent inspection, and what dispute process to select. Under China’s Civil Code, agreed damages can be adjusted by a court or arbitration body if they are excessively high or low in relation to the loss.
The key is to verify the supplier, define the goods precisely, control payment by milestones, and keep a clear record of the agreed terms. These steps cannot eliminate every risk, but they can make problems easier to identify before money is committed—and reduce the chance that a preventable dispute becomes too costly to pursue.
This article provides general information, not advice on a specific transaction. The appropriate checks and contract terms depend on the product, order value, delivery route, and parties involved.
By David Gao, an international lawyer in Beijing, China.
With 20+ year's practice, David Gao is highly proficient in Chinese company law and contract law, possesses extensive experience, and has been selected for the Ministry of Justice’s national talent pool of foreign-related lawyers in China.
For more information, please contact:
Email: gaohexin@163.com
Tel: 86-13611158067
